Recording Transactions (in a Journal and T-Accounts); Preparing and Interpreting the Balance Sheet Bearings & Brakes Corporation (B&B) was incorporated as a private company on June 1, 2010. The company's accounts included the following at June 30, 2010:
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Accounts Payable
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$ 50,000
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Land
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$444,000
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Factory Building
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500,000
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Notes Payable
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5,000
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Cash
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90,000
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Retained Earnings
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966,000
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Contributed Capital
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170,000
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Supplies
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9,000
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Equipment
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148,000
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During the month of July, the company had the following activities:
a. Issued 6,000 shares of stock for $600,000 cash.
b. Borrowed $60,000 cash from a local bank, payable June 30, 2012.
c. Bought a factory building for $166,000; paid $66,000 in cash and signed a three-year note for the balance.
d. Paid cash for equipment that cost $90,000.
e. Purchased supplies for $90,000 on account.
Required:
1. Analyze transactions ( a )-( e ) to determine their effects on the accounting equation. Use the format shown in the demonstration case on page 68.
2. Record the transaction effects determined in requirement 1 using a journal entry format.
3. Summarize the journal entry effects from requirement 2 using T-accounts.
4. Prepare a classified balance sheet at July 31, 2010.
5. As of July 31, 2010, has the financing for B&B's investment in assets primarily come from liabilities or stockholders' equity?